Advice on "employment" with USA-based company

[TheCyclingProgrammer]

I think the reality is that they want to treat their employees like employees, not independent consultants. That requires either setting up a permanent establishment or using a service like Remote.com or LetsDeel and I think more and more remote-first tech companies will start moving in this direction.

Let’s face it, in the tech world in particular, the days of just looking to hire from your existing base are over. Remote first companies are going to become more and more prevalent. It’s only right IMO that they hire people correctly and those employees are afforded the rights they are entitled to and taxed correctly in their jurisdiction.

I’m surely they are fully aware of the PE risks but as you say this is unlikely to be an issue so long as the employees have no real authority to conduct business on behalf of their employer.

From my own personal perspective, I made a decision to return to a perm role as I felt it was the right move for my career. I don’t want some weird hybrid employee/contractor relationship. I’m ready to leave that world behind for now.

[jamesbrown]

I just need to ensure that when the perm role begins that the salary offered is still the same gross after employers NIC and that they don’t try to reduce it to compensate. On the plus side I will have U.K. employment rights, a proper contract and should hopefully be able to agree a salary in GBP too. Should make it easier to get the pension sorted as an employer contribution/salary sacrifice.

Do they really know what they're getting themselves into there, having an employee based in the UK? There is the PE risk (probably fine if you cannot bind the non-resident company) and other risks. Seems super weird to me that they wouldn't want to treat you as an independent consultant on their end. That way, you have complete flexibility on how you want to treat the income on your end, subject to the reality of the working practices. You could choose to use the DPNI scheme (e.g., if you don't like the IR35 risk and also want to MVL) or you could choose to run it through a company (OK, that would impact the contract) or umbrella or self-employed. But you may want the employment rights, in which case you may have to pay the employment costs, including theirs. I'd be surprised if they offered you a pay rise equivalent to ErNI, but you might want to sound them out on that upfront.

[dpilch]

This sounds a lot like the company I am engaged with in the USA.

I have had my contract reviewed via QDOS recently. I had some ammendments changed in the contract but overall they have deemed the as outside IR35.

Most definitely get your own contract checked and good luck.

[TheCyclingProgrammer]

I really don’t see how this could be inside IR35 given the far more clearcut AB5 rule in CA and the difficulty in enforcing SDC, in practice, but you should get it reviewed.

I also don’t really see the problem with the DPNI scheme. It isn’t the CA company that manages this, it’s you. The advantage is employment without ErNI and also no problem w/r to MVL.

Still, it sounds like you’re going the contract route to begin with. Best of luck. You may want to purchase some forward contracts for GBP in USD to reduce currency risk. They may ask for a W8-BEN-E. Insurance should be simple with UK jurisdiction and governing law of E&W.

If I’m going down the contract route I’d just feel more comfortable doing it properly. I am generally quite risk averse.

Agree about the DPNI scheme but I guess from their perspective it’s not just about payroll but also having proper employment contracts in place that reflect U.K. employment rules and that’s what services like Remote.com. They’re small and they’re legal team is tied up with other business right now which is why it’s not happening now.

I just need to ensure that when the perm role begins that the salary offered is still the same gross after employers NIC and that they don’t try to reduce it to compensate. On the plus side I will have U.K. employment rights, a proper contract and should hopefully be able to agree a salary in GBP too. Should make it easier to get the pension sorted as an employer contribution/salary sacrifice.

[TheCyclingProgrammer]

If you think you might have to travel to the USA for work (eventually!), this might also affect how you structure your relationship. You might want to think about what you'd say to the CBP officer when they ask about the purpose of your trip to the USA. Turning up to "do some work" for an American company, if you don't have the correct visa, is a non-starter. And I'm not an expert but I don't know how they would sponsor you for a visa if you're working via some intermediary.

If you're contracting through your own Ltd, it's much easier to present yourself as travelling for "meetings with clients" without any visa hassles.

I have no plans to travel to the US to work so no worries there.

[TheCyclingProgrammer]

Congrats. How are you going to work the share options? Will YourCo have them rather than you? Or will you wait 6 months?

I’ve suggested we hold off on options until they can offer the perm role. It may affect the strike price but hey ho.

[SuperLooper]

If you think you might have to travel to the USA for work (eventually!), this might also affect how you structure your relationship. You might want to think about what you'd say to the CBP officer when they ask about the purpose of your trip to the USA. Turning up to "do some work" for an American company, if you don't have the correct visa, is a non-starter. And I'm not an expert but I don't know how they would sponsor you for a visa if you're working via some intermediary.

If you're contracting through your own Ltd, it's much easier to present yourself as travelling for "meetings with clients" without any visa hassles.

[Old Greg]

So, some positive news. They do intend to move all contractors to employment through an employer of record service (remote.com) but in the meantime I’d have to be on contract potentially up to 6 months.

The contract they have sent me is actually very good, has clearly been written with IR35 in mind, is under England and Wales jurisdiction and contains an unfettered RoS clause - it only stipulates that they are notified and that the sub is qualified.

Ticks all the boxes, I’ve told them that we can treat it like a contract to perm and that while I’m on contract I need to be treated as such and that my status is clear. I’ve also asked that I charge a weekly rate, only get paid when I work and have a clearly defined schedule of work. Also that we drop the options until they can offer me an employment contract.

Haven’t accepted yet as I’m waiting on another offer but I’m trying to look at this positively - after a tulip year work-wise it’s an opportunity to bolster the company reserves by £30k or so before going perm and doing the MVL. One last gig!

Congrats. How are you going to work the share options? Will YourCo have them rather than you? Or will you wait 6 months?

[jamesbrown]

I really don’t see how this could be inside IR35 given the far more clearcut AB5 rule in CA and the difficulty in enforcing SDC, in practice, but you should get it reviewed.

I also don’t really see the problem with the DPNI scheme. It isn’t the CA company that manages this, it’s you. The advantage is employment without ErNI and also no problem w/r to MVL.

Still, it sounds like you’re going the contract route to begin with. Best of luck. You may want to purchase some forward contracts for GBP in USD to reduce currency risk. They may ask for a W8-BEN-E. Insurance should be simple with UK jurisdiction and governing law of E&W.

[TheCyclingProgrammer]

So, some positive news. They do intend to move all contractors to employment through an employer of record service (remote.com) but in the meantime I’d have to be on contract potentially up to 6 months.

The contract they have sent me is actually very good, has clearly been written with IR35 in mind, is under England and Wales jurisdiction and contains an unfettered RoS clause - it only stipulates that they are notified and that the sub is qualified.

Ticks all the boxes, I’ve told them that we can treat it like a contract to perm and that while I’m on contract I need to be treated as such and that my status is clear. I’ve also asked that I charge a weekly rate, only get paid when I work and have a clearly defined schedule of work. Also that we drop the options until they can offer me an employment contract.

Haven’t accepted yet as I’m waiting on another offer but I’m trying to look at this positively - after a tulip year work-wise it’s an opportunity to bolster the company reserves by £30k or so before going perm and doing the MVL. One last gig!

[TheCyclingProgrammer]

On the subject of SDC, it is true that I will have a lot of freedom, not just because I’m remote, but I will work my own hours, use my own equipment etc. No arguments there.

But there will be aspects that make me undeniably an employee IMO. I will have a line manager that I report to. There will be a structure for career progression which I intend to work my way up. I will need to comply with company rules and processes. The company will think of me as employee and I will be treated as such.

I’ve found a U.K. payroll company with experience of managing PAYE schemes for remote employers and they don’t charge much to run it so that’s an option if the company agrees.

As it turns out they are planning to start using an employer of record service which covers a number of countries - this company will effectively be my employer and will deal with employment contracts, HR and payroll and should be the long term solution, but it may not be in place until the new year, so I might be able to get away with a temporary contract either through the Ltd or self employed as a stopgap and worry about the MVL once I’ve got the employment contract.

[SuperLooper]

Should be pretty easy to get genuinely outside-IR35 working practices due to SDC? You work from your own premises, set your own hours, buy your own equipment, etc.

[WordIsBond]

I don't know if this can fly or not but could you form a US company which contracts with the client and you be a foreign-based employee of your own US company?

Or is there a US based employment agency that would work with you on this? Comparable to a UK-based umbrella, so you'd be an employee?

[cojak]

Ah, I think that you’d best speak to MF about this (seriously), as he has been in a similar situation.

I haven’t seen him around lately but he’s a good bet, I think.

[TheCyclingProgrammer]

Bit of an unusual one for me - I recently decided to get out of contracting and return to full-time employment. After several months of looking I have an offer (and possibly a second one around the corner) for a California-based company. It's a good offer, a high 6-figure $ salary plus share options.

The problem is, currently, they only hire non-US "employees" as "contractors", frequently through some kind of incorporated business. This puts me in a slightly tricky position. I've spent some time looking into the various options, searched on here and I've also spoken to their hiring manager about this. After making a big decision to stop being a freelancer/contractor it feels a bit odd to be contemplating taking on what is effectively another contract. I don't want a contract, I want to be able to publicly say "I've just joined XXX" as an employee etc.

So what exactly is the problem? Well, IR35 I guess. As far as I can tell, these are the potential options:

* Engage as a contractor through my existing Ltd. It's hard to see how it wouldn't be caught by IR35 - I haven't seen any contract yet but even if the contract could be twisted to be IR35 friendly I'm struggling to think how the working practices would put me outside. It's employment in all but name. If I operate IR35 then I'm going to take a big hit on the employer's NI. I could try and contrive a way to make it outside IR35 and hope I don't get investigated but I'd probably need to be very careful about how I present the role publicly which feels like I'd just be continuing as a contractor, which isn't what I wanted. Accountant has also advise that share options would make things very complicated too.

* Engage as a contractor on a self-employed basis. Potentially a simple solution and more tax-efficient than operating IR35 as I wouldn't need to worry about employer NIC. However it presents a new problem: I have a decent chunk of retained profits in MyCo and would ideally want to MVL and get that money out as capital. Engaging my new "employer" on a self-employed basis brings the TAAR into play - I'll almost certainly meet condition C and would have to rely on condition D and proving that gaining a tax advantage wasn't the main motivation for liquidating the company.

* Try and convince the company to give me a proper employment contract and arrange to pay my own taxes under HMRC's DPNI direct PAYE scheme. I feel like this is going to be a hard sell. It's quite obscure, there's very little information about it, they probably aren't going to want to arrange anything too custom just for me. They will probably still need me to submit "invoices" through the billing platform they use like everyone else. On the other hand, I don't mind the burden of running the payroll, there's no employer NIC liability and I think it allows me to MVL my Ltd without getting caught by the TAAR.

Are there any other options I've not considered? What approach should I be looking at? Its frustrating because its a good offer, for a really cool company, but one of the motivations for returning to perm employment is that I felt it was the best route for me to progress my career for more senior roles like principal engineer up to CTO in time. It feels like it would be hard to focus on these aspects of the role whilst remaining outside IR35 which in my mind rules out the Ltd company option, although apparently almost all of their non-US employees take this route.

The DPNI route seems like the best possible option but I strongly suspect they won't go for it.

What are the odds of being able to go down the self-employment route, whilst being able to MVL and avoid being investigated and caught by the TAAR and being hit with a massive income tax bill?